Finance Challenges Impacting Entrepreneurs

Darlene Menzies, CEO of Finfind, talks about challenges impacting entrepreneurs.

In South Africa, more than 80% of start-ups fail in their first year and of those who survive only half are still in business by year three – for a country that is relying on the small business sector to grow the economy this high failure rate is concerning and the key causes need to be urgently addressed.

The lack of access to finance is one of the primary causes of small business failure.

Research shows that 67% of start-ups reply on family and friends for funding albeit that there are over 50 funds available to assist start-ups.

Over 350 Funds that Exist

Sadly, most start-ups are unaware of who these lenders are or how to access them; the same is true for the owners of more established and growing businesses. In total there are over 350 funds that exist specifically to provide funds to SME’s yet many small business owners are struggling to raise the capital they need to help bridge their cash flow needs, to expand their business or to purchase property for example.

The reality is that there is more than enough money to lend to SME’s in South Africa from an array of lenders that include niche financiers, invoice discounters, contract financiers, angels and venture capitalists, import and export financiers, development finance institutions, corporate enterprise development funds, government grants and other financial institutions including banks. A solution called Finfind has been developed to educate entrepreneurs about the different lending products available and to link them with the appropriate lenders.

Lack of Finance Readiness

When it comes to the lenders, most of them have the same challenge in common when it comes to their struggle to grant loans to SMEs – the lack of finance readiness. They waste hundreds of hours processing loan applications that cannot be granted as the entrepreneurs have not provided the necessary documentation and compliance that is required to do so.

Some of these include signed financial statements, up to date management accounts, business owner’s statement of personal assets and liabilities, budgets, financial projections, business plans and others.

Another challenge is that entrepreneurs tend to ignore the state of their personal finances. Most lenders take personal credit records into account when it comes to small business finance, alongside the vetting the business’s financial history, its viability and its ability to repay the loan. The lack of collateral can also be a constraint to accessing finance, it is a mandatory requirement for some lenders.

Some Primary Challenges for Entrepreneurs

The primary challenges preventing entrepreneurs from raising finance include:

  • Lack of collateral and poor personal credit history (required by some lenders)
  • Lack of financial readiness (required by all lenders)
  • Lack of knowledge of who the lenders are or what lending products are available

You are in the right place if you want to know how to overcome these challenges and to get access to lenders that match your lending needs go to www.finfindeasy.co.za

Finfind is sponsored by government and is provided free of charge to entrepreneurs.